Barnett, William A. and KalondaKanyama, Isaac (2012): Timevarying parameters in the almost ideal demand system and the Rotterdam model: will the best specification please stand up?
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Abstract
We use Monte Carlo simulations to assess the ability of the Rotterdam model and the three versions of the almost ideal demand system (AIDS) to recover the timevarying elasticities of a true demand system and to satisfy theoretical regularity. We find that the Rotterdam model performs better at recovering the signs of all the timevarying elasticities. More importantly, the RM has the ability to track the paths of timevarying income elasticities, even when the true values are very high. The linearapproximate AIDS, not only performs poorly at recovering the timevarying elasticities but also badly approximates the nonlinear AIDS.
Item Type:  MPRA Paper 

Original Title:  Timevarying parameters in the almost ideal demand system and the Rotterdam model: will the best specification please stand up? 
Language:  English 
Keywords:  almost ideal demand system, Rotterdam model, structural time series models, Monte Carlo experiment, theoretical regularity 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation D  Microeconomics > D1  Household Behavior and Family Economics > D12  Consumer Economics: Empirical Analysis C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C52  Model Evaluation, Validation, and Selection 
Item ID:  36608 
Depositing User:  William A. Barnett 
Date Deposited:  12. Feb 2012 18:10 
Last Modified:  11. Feb 2013 18:35 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/36608 
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Timevarying parameters in the almost ideal demand system and the Rotterdam model: will the best specification please stand up? (deposited 08. Feb 2012 04:03)
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